FIN360 GROUP ASSIGNMENT topic understanding the operations of vietnamese stock markets HOSE and HNX

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAMS  FIN360 GROUP ASSIGNMENT Topic: Understanding the operations of Vietnamese stock markets HOSE and HNX Instructor Class Group number Member : Assoc Prof Dr Dang Tuan Anh : Advanced Finance 61C : : Trịnh Khánh Huyền 11192512 Vũ Thị Huyền Trâm 11195179 Nguyễn Ngọc Linh Đan11196382 Nguyễn Bảo Vân - 11195723 Vũ Ngọc Anh- 11190605 ABSTRACT In today's stock market, it can be said that HNX and HOSE are the two largest stock exchanges in Vietnam This is also a familiar address for many investors in the stock market However, both HNX and HOSE have their own characteristics and tasks They complement each other and support each other in their activities and contribute to providing stockbrokers and stock traders with a reputable platform and means of exchange and purchase Therefore, in order to have a more objective view of the two types of stock exchanges, this report will show the characteristics and differences between them Table of Contents ABSTRACT Introduction HNX a Definition b Functions c Requirements HOSE a Definition .5 b Function: c Requirements II Types of order, transaction methods and matching principles Types of order a HOSE b HNX .9 III Trading time and session 11 HNX 11 HOSE 11 Transaction cancellation 12 CONCLUSION .14 I Introduction HNX a Definition HNX is the name of the Hanoi Stock Exchange, the abbreviation of the English phrase "Hanoi Stock Exchange" HNX is a stock exchange for shares of public companies listed and directly organized and managed by the Hanoi Stock Exchange The predecessor of the HNX was the Hanoi Stock Exchange Center, established in 2005 The HNX was established by the decision of the Government, on the basis of the transformation and reorganization of the Center Hanoi Stock Exchange, officially opened in 2009.The HNX operates with the model of a one-member limited liability company owned by the state, whose representative is the Ministry of Finance Charter capital at the time of establishment was 1000 billion VND b Functions Mobilizing and contributing capital: A place to carry out transactions to buy stocks and shares of enterprises, helping businesses effectively mobilize capital for production and business The idle money is mobilized to promote the development of the market economy Bringing investment opportunities: Instead of saving money in a bank, buying gold or real estate Investors can invest in shares on HNX to earn profit and create effective passive income Redistribution of shares: Public company listed shares on HNX, everyone has the right to buy and become a shareholder Opportunity to help investors share profits, dividends, reduce discontent in current income The big HNX is a measure of the economy: Stocks listed on the HNX will be valued by the market The economy is measured, assessing the level of stability through the increase - decrease or stability of stock prices Funding for projects: Projects lacking capital can be raised by selling securities (debt escrow) The capital is used to invest and develop projects to help increase the price of securities to create profits for players c Requirements ● Authorized capital The amount of charter capital contributed at the time of registration for the offering is from VND 30 billion or more calculated on the audit report ● Operating time The company has operated for at least 01 year in the form of a Joint Stock Company up to the time of registration for listing ● Shareholder structure: The businesses have at least 15% of voting shares held by at least 100 shareholders who are not major shareholders Regarding the transfer within the Company, individuals, organizations and major shareholders of the Company must hold 100% of the shares in the first months and 50% of the shares in the first months the next month Shares have been traded on UPCoM for at least 02 years and approved for listing by the general meeting of shareholders, unless the organization registering for listing has offered shares to the public or the enterprise is equitized.In addition, it is necessary to have a registration file for listing shares according to the regulations of the Hanoi Stock Exchange HOSE a Definition HOSE stands for Ho Chi Minh City Stock Exchange, established in 07/2000, is a unit under the State Securities Commission and manages the listed securities trading system of Vietnam The stock price index in the trading session of all companies listed on HOSE is collectively referred to as the VN-Index Ho Chi Minh City Stock Exchange operates as a State-owned one-member limited liability company with a charter capital of 1,000 billion VND Just like the stock exchanges in the world today, they often operate in the form of a joint stock company b Function: The Ho Chi Minh City Stock Exchange is also the formal institution through which new government bonds are issued and the HOSE functions as a secondary market for some existing bond issues All securities listed on the Vietnam Stock Exchange are denominated in Vietnam Dong (VND) The State Securities Commission, officially established in 1996, is responsible for capital market development and issuing securities listing licenses to companies and operating licenses to securities companies enforce regulations To be listed, a company must be profitable for years continuously, have a charter capital of at least VND billion and have at least 50 shareholders outside the company, holding at least 20% of the shares Joint ventures with foreign countries are technically eligible to list, but in order to be listed on the exchange, these companies must be reorganized into joint stock companies Companies that want to be listed must be approved by an independent auditing company to audit and disclose their financial statements and prospectus four times in four quarters of the year The trading mechanism on the Ho Chi Minh Stock Exchange is an automatic order-matching system The capacity of the previous system was about 300,000 orders per day The trading price of securities is limited to a daily change of plus/minus 7% from the previous day's closing price Particularly on the first listing day of a stock, only one order-matching session is performed, the trading price is executed with a margin of plus-minus 20% c Requirements As the largest stock exchange, it is understandable that the listing conditions on the HOSE are very strict These conditions include:  Authorized capital The value of contributed charter capital up to the time of listing registration must be at least 120 billion VND based on the most recent audited financial statement  Operating time Companies registering to list shares on HoSE must have at least years of operation in the form of Joint Stock Company up to the time of listing registration or Shares of the company have been traded on UpCOM for years or more  Business results The company registered for listing must have made a profitable business for at least consecutive years prior to the year of registration for listing of shares Moreover, the company must have at least 5% return on equity (ROE) at the latest up to the time of listing registration and not have any debts overdue for more than year Beside, there is no accumulated loss in the latest year up to the year of listing registration in the time corporation working  Shareholder structure There must be at least 20% of the voting shares held by at least 300 non-major shareholders  Transparency The company registered to list on HoSE must disclose all debts of the members of the Board of Directors, Supervisory Board, Director/General Director, Deputy Director/Deputy General Director, Chief Accountant , major shareholders and related entities Futhermore, the business has not committed any illegal acts, prohibited acts related to accounting or fraudulent financial statements Last but not least, the enterprise and its legal representative have not been handled by the law for violating the prohibitions on securities and stock market activities within the last years up to the time of registration listing  Other conditions Major shareholders, shareholders being organizations and individuals must commit to hold 100% of the shares in the first months and 50% of the shares in the next months, unless the shares are owned by the company The application file for listing of shares must satisfy the regulations of the Ho Chi Minh Stock Exchange II Types of order, transaction methods and matching principles Types of order a HOSE There are four types of trading orders: Limit orders (LO) are orders that are to be matched at a pre-specified price or better price Limit orders receive the least priority as compared to other orders Moreover, they can be entered into the system in session 1, and and remain effective until the end of trading day or canceled in the system At The Opening (ATO) orders are orders that are to be matched at the opening price ATO orders are only effective in the opening periodic order matching session (session 1) This type of orders receive higher priority than limit orders Partially- filled or unmatched ATO orders shall be automatically canceled at the end of the opening session At The Closing (ATC) orders are orders that are to be matched at the closing price ATC orders are only effective in the closing periodic order matching session (session 3) These orders receive higher priority than limit orders Partially filled or unmatched ATC orders shall be automatically canceled at the end of the closing session Market price (MP) orders are buying orders at lowest selling price or selling orders at highest buying price in the market It is effective in continuous matching order sessions only An order to buy or sell a stock at the best available price at the relevant time When a buy order is entered into the trading system, it will be executed immediately at the lowest available price and the sell order will be executed immediately at the highest available price If the quantity of such a market order is not fully filled, the market order will be the buy order at the next higher price available or the sell order at the next lower price available If the quantity of market order is impossibly filled out because the counterpart orders run out, the buy market order will become a buy limit order (LO) at the last-traded price and the sell market order will become a sell limit order at last-traded price Moreover, MP order is applied only to continuous order-matching sessions It will be canceled if there is no corresponding order at the time of being entered into the trading system Compared with an LO order, an MP is executed faster than an LO order because it is executed immediately after being placed onto the order book b HNX There are six types of trading orders; in which, there are types including ATO and LO same as HOSE mentioned above Post Limit Order (PLO) is a buy or sell order at closing price in after-hours trading sessions on HNX With each stock order, there is a regulation on trading hours, but with PLO, they can trade after hours so as not to miss other jobs Thus, trading PLO orders will help investors be less busy, save time and costs Only after-hours PLO orders are entered into the system PLO orders will not be entered into the HNX system if the closing price is not calculated during the continuous order matching session and periodic order matching session If a counter order is available, the PLO order is instantly matched The trading price is equal to the previous day's closing price The PLO order is final and cannot be changed or canceled Unexecuted or incomplete PLO orders will be immediately withdrawn after the after-hour session ends Market to Limit (MTL) order is submitted as a market order to execute at the current best market price If the order is only partially filled, the remainder of the order is canceled and re-submitted as a limit order MTL buy orders will be converted to buy limit orders, with the limit price equal to the price at which the full portion of the order was filled The LO price will be the same as the MTL price if the MTL price is the upper-limit price MTL sell orders will be converted to sell limit orders with a limit price that is lower than the price at which the filled portion of the order was executed The LO price will be the same as the MTL price if the MTL price is the lower-limit price Market - fill or kill (MOK) order is an order to buy or sell a security that must be executed immediately in its entirety; otherwise, the entire order is canceled; no partial fulfillments are allowed Market - Fill And Kill (MAK) is an order to buy or sell that can be filled partially or canceled The remainder of the order is canceled immediately after the order is filled Transaction method There are two main method: Automatic Order Matching (AOM) Trading performs the order matching process according to price-then-time, priority, without human intervention After traders of brokerage houses key in buy or sell orders into the securities trading center’s terminals, the system queues the orders and arranges them according to a price-then-time priority Orders are first groupe ik d according to price, with the best price taking precedence There are two matching methods: Periodic order matching and Continuous order matching Periodic Order Matching: Buy and sell orders are inputted in the trading system and queued for matching at a specified time at a single price that generates the greatest trading volumes for that particular stock This matching method is used to determine the opening price and closing price of a particular stock Continuous Order Matching: The trading system continuously matches the first buy and sell orders in the queue, and at the same time, confirms each executed transaction via the member’s terminal Put Through (PT) Trading allows brokers to advertise buy or sell interests Members negotiate on details of the deals and input in the trading system for approval They may then deal directly with each other and prices may be adjusted during the negotiation However, the executed price must follow the price range for that particular stock during the day Matching principles: Price Priority states that orders to buy at a higher price will be prioritized, while orders to sell at a lower price will take precedence Time Priority stipulates that for buy or sell orders at the same price, those entered into the trading system earlier shall take precedence in execution III Trading time and session HNX and HOSE organize trading from Monday to Friday every week, except for holidays as regulated in the Law of Labor Though HNX and HOSE both have two sessions in the morning and afternoon, break time starts at 11.30 am and ends at 1.00 pm, their trading time and session are different 1 HNX Sssion Trading method Trading hour Morning session Call auction 9-9.15am Continuous auction I 9.15-11.30am and put through Break time Afternoon session 11.30 am - 1.00 pm Continuous order 1.00pm - 2.30pm matching Periodical matching order 2.30pm - 2.45pm for closing session Negotiation 1.00 - 3.00pm HOSE Session Morning session Trading method Trading hour Continuous auction I 9.15-11.30am and put through Break time Afternoon session 11.30 am - 1.00 pm Continuous order 1.00pm - 2.30pm matching Periodical matching order 2.30pm - 2.45pm for closing session Negotiation 1.00 - 3.00pm Transaction cancellation Similar to the trading time and session, HNX and HOSE possess unlike transaction cancellation a HNX In case of unconfirmed or not-yet- matched orders, customers are not forbidden to cancel or modify their orders If the representative of the securities company enters the wrong order, the order can only be corrected if it is approved by the HNX and the investor b HOSE The rules seem to be more complicated in HOSE During call auction, it is not permitted for any customers to cancel or modify orders within the purpose of determining the opening price and the closing price, which also includes orders transferred from the continuous call However, customers are allowed to cancel during a continuous call if the order or the remaining order has not been executed, including order or the remaining order that has not been executed at the previous call or continuous auction CONCLUSION According to the Ministry of Finance, HOSE would focus only on stock market operations Meanwhile, the derivatives and bond markets will be controlled by the HNX To increase the oversight of listed businesses and security firms and improve the quality of technology facilities, the two exchanges will become subsidiaries of the Vietnam Securities Exchange The stock market is a vast, diversified, and extremely complicated arena in which assets are purchased and sold, mostly at stock exchanges, but also at brokerage firms (stock exchange firms) and on the black market HOSE and HNX are two of Vietnam's most important stock exchange markets nowadays Though they have separated roles and missions, it is undeniable that the two stocks contribute to the Vietnam security exchange REFERENCES So sánh sở giao dịch chứng khoán phái sinh HOSE HNX https://www.bsc.com.vn/tin-tuc/tin-chi-tiet/650931-so-sanh-2-so-giao-dich-chungkhoan-phai-sinh-hose-va-hnx HNX exchane https://sseinitiative.org/stock-exchange/hnx/ Sở Giao dịch Chứng khốn Thành phố Hồ Chí Minh https://finance.vietstock.vn/HOSE-so-giao-dich-chung-khoan-thanh-pho-ho-chiminh.htm http://www.fpts.com.vn/customer-service/stock-trading/trading-regulations/hosetrading-regulations/ https://www.hnx.vn/en-gb/huong-dan/chi-tiet-thu-tuc-24-53.html ... organized and managed by the Hanoi Stock Exchange The predecessor of the HNX was the Hanoi Stock Exchange Center, established in 2005 The HNX was established by the decision of the Government, on the. .. Introduction HNX a Definition HNX is the name of the Hanoi Stock Exchange, the abbreviation of the English phrase "Hanoi Stock Exchange" HNX is a stock exchange for shares of public companies listed and. .. basis of the transformation and reorganization of the Center Hanoi Stock Exchange, officially opened in 2009 .The HNX operates with the model of a one-member limited liability company owned by the